PILOT Numbers Behind McGrory's Metro Column on BC

The Boston Globe's Brian McGrory has done his best to channel Howie Carr in today's metro op-ed column about how Boston College should be paying more in Payments in Lieu of Taxes (PILOT) to the City of Boston.

The problem with McGrory's argument that BC should contribute more PILOT to the city is that he didn't give a handle on what might be a reasonable expectation for those payments, particularly since only some of BC's property is located within Boston's city limits.

By looking at what BC might be expected to contribute in PILOT under the proposal recently made by the city's PILOT reform commission, BC ought to be contributing at least $1.6 million more to the city than they are currently paying through PILOT and real estate taxes.

Here's how I come by that number: Boston College's existing Chestnut Hill campus (just that part within the Boston city limits) are currently assessed at a valuation of around $480 million, according to the city's website. Add to that the 16-story apartment building at 2000 Commonwealth Avenue they purchased in 2008 and the former St. John's Seminary land they purchased from the Archdiocese of Boston for $177.4 million in a series of transactions between 2004 and 2007. Added together, those properties lying within Boston have a current value in the ballpark of $722 million, no small change.

The current property tax rates in Boston -- the amount that BC would be paying if they were not a tax-exempt institution -- are $12 (residential) or $29 (commercial) per year per $1000 of valuation for residential property. Since BC's primary financial activities are in education and research, not rental income, most of the land would fall under the commercial rate; I'll assume 75% commercial, 25% residential, or $25 per $1000 of valuation.

If BC were to pay full taxes on their property at that $25 rate it would total around $18.05 million per year. The city's commission that is looking at PILOT reform is recommending that tax-exempt institutions, like universities, voluntarily contribute PILOT at a rate of 25% of the tax rate -- corresponding here to $4.5 million -- of which the institution could elect to pay half in payments-in-kind (e.g., community benefits). The 25% figure is based on a calculation of the cost of city services the institution requires as part of its operation, such as the emergency response to many campus incidents (including Tuesday's ammonia leak at BC's Conte Forum).

Applying the commission's recommendations implies that BC should be contributing a minimum of $2.3 million cash in PILOT to the city, while BC is currently, according to McGrory, paying only $0.3 million in PILOT and $0.4 million in real estate taxes for taxed property. (Nearly all of the valuation for the taxed property is 2000 Commonwealth Avenue; since I include it in the PILOT calculation above, it is appropriate to consider it alongside BC's current PILOT.)

So BC should be paying at least $2.3 million in cash to the city, while they are currently paying only $0.7 million, a shortfall of at least $1.6 million. Based on the commission's recommendations, McGrory has a point that BC is underpaying the city for required city services.


McGrory's tone has evinced a torrent of outraged (and outrageous) comments -- channeling the tone of Howie Carr fans who comment at the Boston Herald's website -- nearly all from people defending BC from what they view as his unfair attacks on their alma mater. Read at your peril.


Image of BC's campus:

http://www.flickr.com/photos/jimcintosh/ / CC BY 2.0

Residential vs. Commercial Taxes in Boston

Shirley Kressel, of the Alliance of Boston Neighborhoods, has written a nice blog posting about the competing proposals by Governor Deval Patrick and Mayor Thomas Menino to address the relative burdens shared by commercial and residential property taxpayers in Boston.

The 2004 state law temporarily raised commercial property taxes a bit by raising the commercial tax cap from 175% to 200%, thereby allowing residential property taxes to increase at a slower rate. The temporary increase is currently slowly decreasing back to its original level. As I understood it, Mayor Menino's proposal (HD 2717; see also PDF linked here) is to return the commercial tax rate back to 175%, while Governor Patrick's proposal has a two-year freeze at 183%; the Mayor's proposal results in higher residential property taxes, while the Governor's proposal results in lower residential property taxes.

Kressel uncovers all the layers of the mess, however, noting the hidden secrets of the 2004 law and Mayor Menino's proposal to repeal it. She finds some "dirty tricks":

Menino’s bill would help residents in one way: it would repeal two harmful “dirty tricks” slipped into the 2004 legislation by business interests after the original “deal” was set. The first trick drops the commercial tax rate down to 170% in 2009 – lower than the pre-existing 175% -- permanently shifting more of the city’s tax burden from businesses to residents. The second, and far more devastating to residents, permanently prevents the mandatory residential portion of the tax burden from ever going back down from its highest level, no matter how low housing prices go or how high commercial values go. This portion used to be 30% of the total levy; it is already up at 42%.

My understanding then is too simplistic: Mayor Menino's bill would lower residential property taxes in the long-term by repealing the 2004 law's reduction of the previous 175% rate to 170%, but would keep residential property taxes high in the long-term by fixing the 42% residential property tax burden (rather than letting it lower back to 30%). Here's a case where we need some solid guidance from an independent analyst, like the Massachusetts Taxpayers Foundation's Michael Widmer, projecting the future costs of these various competing elements of the Mayor's and Governor's proposals, and the 2004 law left unchanged.

Tax law is usually pretty boring stuff. But when so many people throughout Boston keep asking for property tax relief, understanding in detail the issues involved can be more interesting than you might expect. And it could tell you something about your elected officials' prioirities.

Where are these different proposals in the process? The State Legislature just passed Mayor Menino's bill, so it awaits Governor Patrick's signature. This would be a good time to contact the Governor to tell him if you approve or disapprove of the bill.